Analyzing International Relations and American Politics

Immigrants are Crucial for Economic Growth

Trump has promised to Make America Great Again™. A core part of this message has been the assurance that Trump will improve economic conditions for those struggling in stagnating sectors of the economy and achieve massive GDP growth. This goal, however, stands in sharp contrast to another one of Trump’s proposals: the limiting of immigration into the U.S. As I wrote previously, immigrants (legal and otherwise) do not “steal” American jobs. Indeed, they grow the overall economy and are a boon for the welfare state because they tend to be younger than the average American worker. New research and data support this argument even more persuasively, and thus it’s hard to see how Trump can honor his promise of strong economic growth while simultaneously putting up so many walls to immigration.

The positive economic externalities of large-scale immigration can be seen in Germany right now. Given Germany’s acceptance of over a million refugees from the Middle East, its economy is an ideal test case for the economic effects of immigration. New data reveals that immigrants and refugees have massively boosted entrepreneurship in Germany. Indeed, The Economist recently reported that 44% of new businesses in Germany were opened up by foreigners this year. Of course, recent influxes of refugees mean that foreigners make up a higher percentage of the German population, but 44% is still an incredibly large number for such a minority group. This trend can be explained in a few ways. First, immigrants bring ideas and traditions which they can then use to develop innovative new products. For example, Syrian confections have become increasingly popular in Germany since an influx of skilled bakers has made them commonplace in Berlin and other large German cities. Second, given the relatively weak skill set of many refugees, it is often difficult for them to enter the workforce through traditional means, especially if they don’t speak the language well and lack connections. This dynamic can hurt labor force integration, but it also forces individuals to self-employ or develop innovative new ideas with which to compensate for their lack of traditional skills and qualifications. These pressures force innovation, and that leads to measurable increases in economic growth and entrepreneurship. The Economist noted that Germany has incredibly high levels of regulations, impeding entrepreneurship. Thus, it argued, the fact that immigrants have been able to be so successful even in spite of overly complex German bureaucracy is a testament to the economic potency of immigrants.

Immigrants might have come to the U.S. specifically to work in growing fields, and so had ideas and expertise they had cultivated before they arrived. When they arrived, they were able to quickly turn those ideas into patents in a way that would have been more difficult in other countries with weaker intellectual-property protections. For example, the amount it cost to hold a patent to a term of 17 years in 1900 cost just 11 percent of what it cost in the United Kingdom in the same year. What’s more, as Hunt points out, many immigrants have expertise and interest in fields like science and engineering where there are fewer native-born specialists,, and which are more conducive to patents and invention.

In addition, because they had some discretion in choosing their destination city, some immigrant inventors might have sought out geographic areas where there were other people working in similar fields. This would create what economists refer to as spillover, which is when the presence of a bunch of experts in one geographic area leads to the generation of more ideas because people share notes and collaborate. For example, a number of immigrants, including a Canadian, a Belgian and a Russian, worked together at the Radio Corporation of America to create the first electron microscope.

Clearly, then, Trumpian protectionism and restrictions on labor flows from outside of the United States will only Make America’s Economy Backwards Again. Of course, some will argue that Trump only wants to prevent terrorists from entering the U.S., and that may very well be true. But his inept implementation of travel restrictions has meant that people who have no ties to terror groups have been unfairly inconvenienced, and that might have a chilling effect on people’s willingness to come to the U.S. to seek employment. Indeed, a recent story in The Atlanticrevealed that Trump’s travel restrictions inadvertently expelled a brilliant Iranian geneticist who was working on tuberculosis research. Frustratingly, she was only one of hundreds of highly skilled scientists blocked from entering the country due to Trump’s incompetence. In response to the chaos caused by the pathetic rollout of Trump’s executive order, many high technology companies in Silicon Valley are now considering moving their talent bases to Canda, which has been far more welcoming to immigrants and refugees than the U.S. If companies do relocate workers, they would trigger a large brain drain out of the U.S., weakening innovation and entrepreneurship and undermining the American economy. If we actually want to keep America great, we need to stop this pernicious nativism in its tracks. It’s racist, and it is undermining U.S. competitiveness and economic growth. Trump’s low-skilled supporters might like his ill-conceived policies. But if they don’t tone it down, high-skilled Americans will leave to find work elsewhere, and they will be stuck in a backwater.